Balotelli, who has been subjected to racial abuse on numerous occasions, posted the image of the computerized character on Monday with the heading "Don't be a racist."
The text also read: "Be like Mario. He's an Italian plumber, created by Japanese people, who speaks English and looks like a Mexican."
Balotelli tried to defend the post as criticism began to intensify online by writing on Twitter: "My Mom is jewish so all of u shut up please."
But he soon deleted the image from his Instagram account before further backtracking on Tuesday.
"I apologize if I've offended anyone. The post was meant to be anti-racist with humour," Balotelli wrote on Twitter. "Not all Mexicans have moustache, not all black people jump high and not all Jewish people love money.
"I used a cartoon by someone else because it has Super Mario and I thought it was funny and not offensive. Again, I'm sorry."